Ivo Watts-Russell and Peter Kent, employees of the Beggars Banquet record store and label, founded Axis Records in late 1979 as a property of Beggars Banquet that was run by the two. After the first four Axis singles in early 1980, the name was changed to 4AD when it became apparent that the name Axis was already being used by another music company. The solution to this problem came from a promotional flyer that they had printed up to call attention to the new releases. The flyer's designer had added some typography which played on both the new year and the idea of progress:

1980 FORWARD 1980 FWD 1984 AD 4AD

Quickly scrambling for a new name, Ivo glanced at the flyer and suggested "4AD." Peter Kent agreed, and, with that split-second decision, 4AD was born.

An initial idea for the label was that it would be a "testing ground" for Beggars Banquet; successful acts would graduate up to Beggars Banquet after a year at 4AD. The only band to follow this path would be Bauhaus, who were signed to Beggars Banquet in late 1980 right before Ivo and Peter purchased the label outright.

The two were the sole owners for about a year. Kent sold his share to Watts-Russell at the end of 1981, and started a new Beggars Banquet subsidiary, Situation Two Records. Watts-Russell would maintain ownership of the label, and act as its president, until the late 1990s.

In the 1990s, 4AD established an office in Los Angeles and enjoyed success with bands such as The Breeders, Red House Painters, Unrest, and His Name Is Alive. In 1999, Watts-Russell sold his share in 4AD back to the Beggars Group (as it had by then become), but the label continued to release music and add new artists to its roster.[2]

Even in 1992, new signings like Belly and Red House Painters produced records which are also considered amongst the classic era of 4AD. However, the label's deal with Warner Bros. Records in the United States in 1992 would start the beginning of a truly new phase in 4AD history. By 1995, whatever remnants of the "classic era" that were left were dying out, as evidenced by the final 4AD release for Red House Painters (Ocean Beach, CAD 5005), and the last albums and break-ups of Belly and The Wolfgang Press. New signings that year included American underground acts Kendra Smith, Tarnation, Air Miami and The Amps.

In 2008, the Beggars Group recognised that 4AD was its most prestigious and successful label, and re-aligned itself so that several labels (including Beggars Banquet itself) were folded up on to the 4AD label.[3] Bands like Stereolab and The National were signed to 4AD as a part of this merger.